Testimony in Support of the Tax Cut Provisions Included in the 2012/2013 Biennial Budget Proposal
Carol Weston, State Director
Americans for Prosperity-Maine
February 28, 2011
Good afternoon, Senator Rosen, Representative Flood, and distinguished members of the Joint Standing Committee on Appropriations and Financial Affairs. My name is Carol Weston and I have the honor of serving as the Maine State Director for Americans for Prosperity.
Today, I add my voice to those in support of the tax cut package included in Governor LePages 2012/2013 biennial budget.
Americans for Prosperity is a nation-wide organization of grassroots leaders who engage citizens in the name of limited government and free markets on the local, state and federal levels. The grassroots activists of AFP advocate for public policies that champion the principles of entrepreneurship and fiscal and regulatory restraint.
AFP has 32 state chapters, including Maine, and a national network of 1.6 million citizen activists. AFP-Maines membership now totals nearly 4,000.
On behalf of those 4,000 Maine members, I urge the Committee to embrace the Governors tax cuts as a fiscally responsible plan to create jobs and enhance the long-term financial security of Maine people.
Having served in the Maine Legislature for twelve years, I cannot tell you how many times I have heard that a certain policy reform will make Maine a more affordable place to live, work and raise a family. I know you have all heard this countless times as well. More often than not, that phrase is up for debate.
Not this time.
This broad-based tax cut package will have a positive impact on nearly every Maine taxpayer by allowing them to keep more of their hard-earned money. The $203 million in tax relief included in this budget will truly make Maine more affordable for individuals, families and small business entrepreneursthe backbone of Maines economy.
Tax Cuts for Wage-Earners
By reducing the top individual income tax rate from 8.5% to 7.95%, eliminating the marriage penalty and increasing the personal exemption to the federal rate, this budget allows most Maine wage-earners to keep more of their money.
You will hear opponents of tax relief claim this income tax cut is nothing more than a tax break for Maines wealthiest citizens. That is a false claim.
Maines top individual income tax rate of 8.5% applies to anyone who earns more than $19,750 in taxable income an extraordinarily low threshold for our top rate. That is why it is crucial you create real income tax relief.
Although the top income tax rate kicks in at $19,750 in taxable income, Maines median personal income is $46,541, meaning most Maine wage-earners face a marginal tax rate at the very highest possible bracket.
Tax relief opponents would have you believe that falling into the top income tax rate makes you one of Maines wealthiest citizens. But, as you can see, their claim is shattered by the facts.
Cutting the top individual income tax rate would have a profound effect on most Maine wage-earners bottom line. To deny the people this tax cut would send a message that personal economic security takes a back seat to the demands of a government that always wants more. I doubt that is a message this Committee wishes to send.
Tax Cuts for Low Income Families
This budget eliminates Maines marriage penalty, conforming to the federal standard deduction for a couple. In addition, it increases the personal exemption to the federal level.
For a family of four, these changes mean that a working family can earn almost $27,000 ($26,801+) a year before paying $1 in Maine income taxes. Now thats a tax-free livable wage. It means that this family can earn $5,600 more in 2012 in tax-free income, compared to 2011. For the average Maine family of four, these changes mean a $476 tax cut in 2012, an almost 14% state income tax cut.
For low income families who do not typically itemize their tax deductions, this change in Maines tax law is significant. During this Great Recession, low income families have been hit particularly hard. You can alleviate their hardship by empowering them with a stronger family budget.
Maine families, especially low income families, need this money. They should have the right to keep more of what they earn. Government does not need their money. You have an obligation to cut spending, eliminate wasteful programs, and reduce our bloated bureaucracy.
In all, a projected 134,515 Maine families will benefit from this tax cut. Its time you let these families decide how best to spend or save.
Tax Cuts for Entrepreneurs
It will be Maines entrepreneurs who lift us up toward wealth and prosperity. Our entrepreneurs and the small businesses they run are engines of job creation. They are masters of innovation and drivers of efficiency. They are our economic life-blood, but for too long they have been pumped dry.
They have been held back by a crushing tax burden and a government hostile to their free market values. You have an opportunity, and an obligation, to reverse this trend.
Matching Maines businesses taxes, including bonus depreciation, to the federal thresholds can immediately boost our economy.
This budget will create a powerful incentive for business owners to invest. It will be more affordable for businesses to expand, to purchase new equipment, and to contract for new services. That means new jobs, more transactions, and a shot in the arm to our flailing economy.
You cannot afford to reject these changes. They may be our last hope for a thriving business community in Maine.
Tax Cuts for Family-Owned Businesses
This budget raises the Maine estate tax exclusion amount from $1 million to $2 million, beginning in January 1, 2013. This is a modest change when compared to the federal estate tax exclusion amount of $5 million. Never-the-less, it is an important step in the right direction.
Opponents of tax relief would again attempt to wage class warfare, claiming this tax cut is nothing more than a give-away to the super rich. Such a statement is naive.
Are the parents and children running a family-owned business or farm part of the super-rich? Their land and equipment may put the value of their assets at more than $1 million, but we all know that family works hard every day to keep the business running while earning enough to stay afloat.
If the head of that business passes, our unreasonable estate tax could force a mourning family to sell that businesswhich may have been in the family for generationsjust to pay estate taxes to the government. That is not just poor fiscal policy, its immoral, and it must end.
This budget changes Maines estate tax to protect families who own a business, and that is a tax change we should all get behind.
This is a tax cut package for all of Maine, and it has my support.
It does not pick new winners and losers like past attempts at tax reform. It does not favor one economic class over another as opponents would have you believe.
Individuals, families, seniors and entrepreneurs will keep more of their money. Our economy will receive the infusion of cash from consumers and small business owners it so desperately needs.
Now is the time to look forward. The tax cuts proposed in the Governors budget will help usher in an era of new jobs, financial security, and a robust economy. You must not let this opportunity pass us by.
I urge this Committee to endorse this tax cut package and stand up for the taxpayers of Maine. Our economic security depends on it.
Thank you for your time. I am happy to answer any questions you may have.